High Court Decision On Middlesbrough Property Dispute Overturned

The Court of Appeal has overturned a ruling which stated a tenant who chose to move to a new property following long-term negotiations regarding a new lease on its existing location was liable to pay 14 months of rent, with the decision putting the concepts of an implied periodic tenancy and tenancy at will in the spotlight.

The case of Erimus Housing Ltd (EHL) v Barclays Wealth Trustees (Jersey) Ltd (BWT) saw the High Court rule that the former tenant was liable for rent up to October 2013 after it served notice in May 2012 to vacate the premises in Middlesbrough in August 2012. That decision was on the basis of BWT’s argument that EHL had acquired a periodic annual tenancy which could only be terminated on at least six months’ notice.

However, the Court of Appeal has now overturned the decision, stating that since the original lease ended in October 2009 EHL continued to occupy the premises under a tenancy at will – which can be terminated at any time by either party – and rejected the suggestion a periodic tenancy had arisen, even after negotiations for a new lease stalled in June 2011.

Ruling, Patten LJ stated: “The payment of rent gives rise to no presumption of a periodic tenancy... In these circumstances, as in any other subject to contract negotiations, the obvious and almost overwhelming inference will be that the parties did not intend to enter into any intermediate contractual arrangement inconsistent with remaining parties to ongoing negotiations.
 
“In the landlord and tenant context, that will in most cases lead to the conclusion that the occupier remained a tenant at will pending the execution of the new lease.”

Expert Opinion

The landlord in this case took a fairly unusual position in this instance by arguing that a periodic tenancy had arisen. Often when a former tenant remains in occupation after the expiry of a lease, the landlord will want to prevent a periodic tenancy arising in order to avoid the tenant acquiring security of tenure and enable the landlord to regain possession of the property if a better deal can be found. <br/> <br/>"A tenancy at will is generally implied where there are negotiations for a new lease, but in this instance the landlord argued the opposite in order to secure rent payment for a longer period. <br/> <br/>"The decision should offer some comfort to those landlords who continue to accept rent after the expiry of a lease and while negotiations continue, but do not want to find themselves in a position where they cannot obtain possession of the premises. Equally, tenants should be comforted by the fact that by remaining in occupation throughout negotiations, they are not committing themselves to the premises for a longer period." Lisa Stratford - Senior Associate